Indian Rupee (INR) Exchange Rate Falls from Nine-Month High
On Monday hopes surrounding the outcome of the Indian national election pushed the Rupee to a nine-month high against the US Dollar.
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It is expected that election exit polls will confirm that the main opposition Bharatiya Janata Party will be victorious, increasing the odds of India enjoying a more stable and prosperous economic future.
Economists have forecast that Indian nationals have abandoned support for the ruling Congress Party due to years of corruption and slow growth and the Rupee was broadly stronger as a result.
In the view of foreign exchange expert Satyajit Kanjilal; ‘The exuberance seen now in the stock and Rupee is because people are expecting a new government with a large mandate will sort out policy paralysis.
‘Already key sectors like power and infrastructure is rallying but the Reserve Bank of India will unlikely let the Rupee strengthen too much and they are actively buying Dollars from the market and building up the country’s reserves.
‘Much of the rally in the Rupee is largely behind us.’
In accordance with this belief, the Rupee did shed much of its recent advance before the close of local trading.
The appeal of the Rupee declined after India’s manufacturing output was shown to have contracted by 0.5 per cent in March.
While this was an improvement on the contraction of 1.7 per cent recorded the previous month, it was still a poor result.
On the month manufacturing production contracted by 1.2 per cent while mining output shrank by 0.4 per cent.
12 of the 22 industry groups in the manufacturing sector recorded contraction in March.
Meanwhile, India’s inflation rate came in at 8.5 per cent in April year-on-year rather than the 8.4 per cent estimated.
In the week ahead India’s WPI inflation report is the other major piece of domestic news to be aware of. The figure is due out on Thursday.
India’s foreign reserves, deposit growth and bank loan growth data will be released on Friday.
Rupee movement could also occur as a result of US news (including the nation’s advance retail sales and consumer price index).
Ukraine developments and Chinese data may also impact risk-appetite and emerging market assets like the Rupee.
Volatility in the GBP/INR pairing will most likely be occasioned by the UK’s employment report.
The British Pound is currently trading against the Indian Rupee in the region of 101.4240.
The US Dollar is currently trading against the Indian Rupee in the region of 60.0500.